Birmingham Council signs 'unique' deal

Birmingham City Council has signed a £475m deal with support services giant Capita - but, rather than merely signing an outsourcing agreement on 1 April, the unusual collaboration has been called a "transformation" agreement, and operates more like a lease.

Birmingham hopes the Capita deal will find it £500m of savings, while creating 800 jobs and "improving the prosperity of the city".

"We are trying to create a world leading centre of excellence in the transfer of government services," said former council head of service delivery Bob Carter, who at the weekend legally became an employee of Service Birmingham, the joint venture firm.

The deal is unique in a number of ways. The 500 council IT staff now employed by Service Birmingham have not been moved under protections provided by TUPE (Transfer of Undertakings - Protection of Employment Regulations) - rather they have been "seconded". The council was not available to explain the difference today.

The joint venture which will service the council has been called a strategic partnership, but it's 65 per cent owned by Capita. It is also thought to be the largest "lease" of local government services in Europe, according to Kablenet director of research Paul Smith.

This is the sort of deal Birmingham's firebrand MP Claire Short and 21 others said should be frozen.

They called for a moratorium on outsourcing last week, while they figured out if it was working for the public sector. Interestingly, Short was the only one of Birmingham's seven MPs to sign up.

Yet, this is also the kind of deal Cabinet Office golden boy Ian Watmore will be shoehorning into local government as part of the 2007 comprehensive spending review (effective 2008-09). It is "likely" council funding will depend on their adherence to his transformation agenda, he said in February.

No public authority in the world could give Birmingham a lead on transformation, Carter said. "We wanted to do something unique in the way we were transforming."

And it's just what Walsall Metropolitan Borough Council had been hoping to do, in a proposed £500m deal with Fujitsu, which never came off.

Birmingham had been watching closely as the Walsall deal came a cropper in February. Walsall had been hoping it could rely on the private sector to do the same that councillors are hoping Capita will do for Birmingham: cut costs, improve services, and create jobs. ®